On July 15, 2021, the California Supreme Court handed down a decision which will have a significant impact on the way employers must pay hourly/non-exempt employees for missed meal periods, rest periods, and heat illness recovery periods. In Ferra v. Loews Hollywood Hotel, LLC, the Court held that such payments must be made at the “regular” rate of pay, not the base hourly rate. The court’s decision also will have a retroactive effect, meaning that employers must immediately change payroll practices and potentially pay employees back wages for the last four years.

Time rounding is common practice used by employers of hourly employees to simplify their payroll calculations. Although this practice is legal, federal and state guidelines do exist on how to fairly round “hours worked” by employees. Recently, the California Supreme Court offered additional parameters on the use of time rounding, holding that such practices are not permissible in the context of providing non-exempt (hourly) employees their 30-minute unpaid meal periods.